On the IMF website, its chief economist warned that China could once again “spook” global financial markets in 2016.
Global spillovers from China’s slowdown, IMF Economic Counselor Maurice Obstfeld added, have been “much larger than we could have anticipated,” affecting the global economy through reduced imports and weaker demand for commodities.
He also stressed that the health of the world’s second-biggest economy will again be a key issue to watch in 2016.
Bloomberg Business reported that, as global equities on Monday got off to a rough start to the year, Obstfeld said: “Growth below the authorities’ official targets could again spook global financial markets. Serious challenges to restructuring remain in terms of state-owned enterprise balance-sheet weaknesses, the financial markets, and the general flexibility and rationality of resource allocation.”
He also noted that emerging markets – including an already battered SA economy - will also be “centre stage” this year.
Currency depreciation, according to Obstfeld, has “proved so far to be an extremely useful buffer for a range of economic shocks”.
But, he warned: “Sharp further falls in commodity prices, including energy, however, would lead to even more problems for exporters, including sharper currency depreciations that potentially trigger still-hidden balance sheet vulnerabilities or spark inflation.”
